Total Cost of the Plan

[Guest GAshley]

We have several clients who maintain both a self-insured medical plan and a cafeteria plan through which premiums for the self-insured medical plan are paid. According to my conversations with the IRS, the cost to the employer of a self insured plan includes the amount of claims paid for the plan year. Also, the IRS has informed me that premiums paid for a fully insured plan for levels of coverage in which an employee is not required to contribute (e.g. employee only) should not be included as part of the cafeteria plan(assuming the plan document does not include in the plan.) By analogy, claims paid in a self-insured plan for levels of coverage in which the employee does not contribute should not be included as part of the plan. This seems to be difficult information to obtain. How do you efficiently obtain a breakdown of claims paid for less than the full amount of coverage? Are other preparers even going to this extent? Furthermore, should the total cost of the plan equal only the participant's salary reductions if they are actually greater than the amount of claims paid for the year? Please provide some feedback of what other preparers are doing?

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GAshley

[KIP KRAUS]

GAshley

I'm not sure exactly what you are asking, but here's my take on self-insured medical plans. Not only are claims considered part of the the plan cost, but any related expenses such as TPA fees, stop-loss Insurance premiums and estoimated claims reserve. From these elements of the self-insured plan an actuarial fully insured equivalent rate should be determined for single coverage and family coverage. These rates are then applied to participant/employer cost. Also such a rate must be calculated to determine COBRA rates.

This is a more complicated situation, apparently than your question indicates. If you would like to e-mail me with more details I'd be happy to reply with further information.